Fox vs. Aereo: How Networks Keep Boosting Their Adversaries

When Fox executive Chase Carey threatened to turn his network into a pay-TV operation because of the a posed by Aereo, he also gave his little-known adversary a huge publicity boost.

What's Aereo, people wondered, and why does Fox find it so threatening?

A person familiar with Aereo's position tells TheWrap that Carey's comments Monday "definitely created a lot of positive noise" for the company, giving it a major uptick in media coverage and social media attention. (Among the headlines was "Aereo could bring down broadcast TV," courtesy of Fortune.)

After Carey's threat, Univision suggested that it, too, might change to a pay-TV model. Then CBS chief Les Moonves told the New York Times that he "wholeheartedly supported what Chase said.” NBCUniversal's Steve Burke has also privately expressed his support for Carey, accoring to the Times.

It's too early to tell if the attention will lead to more Aereo subscribers – which would be the the last thing Carey wants.

Networks are in a nasty Catch 22: The more they mention new rivals like Aereo, the more publicity they get. And if that publicity translates to more customers, the rivals will become greater threats than before.

Aereo declined to comment for this story, and Fox did not immediately reply to a request for comment. Aereo, based in New York, is backed by Barrry Diller's InterActiveCorp. Diller, ironically enough, co-founded Fox with Rupert Murdoch before moving on, two decades ago. Aereo announced in January that it had raised $38 million, adding to $20.5 million from a previous round of fundraising.

Google searches for Aereo were surging even before Carey's remarks (see Google chart, above), likely due to both the company's expansion plans and a legal win last week.

So, what did all those Googlers learn?

Aereo is a streaming service that captures live TV signals using antennas small enough to fit on a fingertip. Aereo says it puts "tons" of antennas in data centers, and then relays the signals over the Internet to laptops, phones and tablets.

It relays ABC, NBC, CBS, Fox, the CW, Univision and PBS, among other networks available by antenna, but does not relay cable channels. That's why Carey threatened to go the pay-TV route. Univision has since made a similar threat.

Aereo offers its service for as little as 17 cents a day for annual subscribers, but also sells its access by the day for a dollar and taxes. The service is now available only in New York, but is expanding to 22 other parts of the country, including Chicago, Houston, and Philadelphia.

Unlike a TV outfitted with an antenna and nothing else, Aereo lets customers fast -forward through ads. That poses a new threat to the traditional ad-sponsored TV model, which is already besieged by DVR viewing and Dish's ad-skipping AutoHop service.

Aereo says all it's doing is harnessing – on a massive scale – the power of the humble antenna, which has always given TV owners access to the public airwaves. Carey calls it "stealing."

Other networks agree, and joined Fox in taking Aereo to court, saying it was illegally "retransmitting" their signals.

But the legal challenge hasn't gone well for networks, so far. Last week, the 2nd U.S. Circuit Court of Appeals in New York accepted the company's contention that it isn't retransmitting signals, given that it has all those "tons" of individual antennas.

In another blow for networks, many potential customers learned about Aereo for the first time because of the ruling.

This isn't the first time the networks have given a publicity boost to a competitor. During last season's spring upfront presentation to advertisers, broadcast executives tore into Dish's AutoHop. In the process, they informed many people of its existence for the first time.

Amid the publicity – and the network lawsuit that followed – Dish only gained customers.

It ended 2012 with 14.056 million subscribers, compared to 13.967 million in 2011.

Because Aereo is private, there's no way of knowing if its subscriber base will increase as well. But if it does, Aereo might want to send a gift basket to Fox.